On March 23, 2010 President Obama signed into law the Patient Protection and Affordable Care Act (PPACA) commonly referred to as Obamacare, the Affordable Care Act and the Federal Health Care Law. The statute is over 2,000 pages long and there are very few explanatory regulations or “official interpretations.” The Act is very detailed, complicated and in some cases contradictory. Much of the complexity is the result of the law’s need-based approach in that there are few concrete numbers, but rather formulas governing the application of PPACA to individuals and their dependents based upon income and other economic factors.
Some aspects of the law such as maintaining children on their parents’ insurance until age 26, the proscription of benefit maximums and no denial of coverage due to pre-existing conditions are currently in effect. The requirement for employers to furnish coverage to their employees is effective January 1, 2014. However, the extent of employee coverage depends upon the number of employees in 2013 and the number of hours worked by those employees in 2013. Therefore, to avoid an unpleasant surprise on New Year’s Day 2014, employers must review their employee demographics in detail to determine whether adjustments in the workforce are needed to predict the employer’s health care coverage obligations in 2014.
The Affordable Care Act requires large employers to either offer health insurance to their full-time employees or pay a penalty through the Internal Revenue Service. A full-time employee is defined as an employee who averages 30 or more hours per week. A large employer is one that averages 50 or more full-time employees and full-time equivalent employees (FTEs).
To determine if an employer is a large employer necessitates determining the number of employees averaging at least 30 hours a week in 2013 and adding to that figure the number of FTEs. The number of FTEs an employer has is based upon taking the aggregate monthly hours worked by part-time employees (those who work fewer than 30 hours per week) counted on a monthly basis during calendar year 2013, divided by 120.
If an employer is a large employer resulting from the formula which is outlined above, it must provide minimum essential health care coverage going forward to all employees who average at least 30 hours a week during a previous period which can vary between 3 and 12 months during 2013. Minimum essential coverage is subject to a number of criteria. The amount an employee may pay as a share of the premium is based upon the employee’s W-2 income.
As you can see from this basic overview, the PPACA is extraordinarily complex. The point of this article is that even though compulsory health care coverage and/or the related fines do not begin until January 1, 2014, whether you are subject to this law as a large employer and which of your employees are entitled to the medical coverage is a result of your employment activity in 2013. Several measures can be taken to regulate whether you will be deemed a large employer in 2014 and which of your employees are entitled to medical coverage, but those measures need to be taken now.